Policy allows makers to keep their USD

A Lastest News about Business Practices in China

Last updated: 16 Sep 2011

SAFE relaxed rules on mandatory foreign currency conversion to the yuan this year, mainly to stem growth of forex reserves. But the appreciating yuan means fewer suppliers are likely to take advantage.

 

China exporters have welcomed the central government's decision allowing them to keep US dollars in overseas accounts instead of converting them into yuan. But with small and midsize makers dominating the country's export landscape, very few are able to take advantage immediately.

 

Liang Qinqin, salesperson at Ningbo-based Zhejiang Tailong Commercial Bank, said the policy could help reduce currency exchange risks for exporters. Unlike before when suppliers were required to convert their dollars into the yuan, now they can choose a more favorable time to exchange their money, or not at all. Companies that need dollars to pay for materials and components, for instance, can just keep the foreign currency in their overseas account. Previously, they would have to convert their dollars into the yuan and then back into dollars when needed. In the process, suppliers lost about 25,000 yuan ($3,798) for every $1 million that had to be changed to the yuan and back.

 

Chang Dong, international business division president of the Konka Group, said opening an overseas dollar account is helpful since the consumer electronics company has several subsidiaries in various countries. Interest rates are higher as well.

 

But Liang admitted that with the yuan's continued appreciation, some companies may not want to take advantage of this policy and choose to convert their dollars into the local currency instead.

 

Among these suppliers is Ningbo Aux Imp & Exp Co. Ltd. Export sales manager Chen Hongyu said exchanging dollars for the yuan makes more business sense now.

 

Further, small makers see little benefit to their export business. Most of them need to convert their dollars anyway since they need the yuan for their day-to-day operations, including paying workers' salaries.

 

For better implementation, some local governments are organizing seminars and talks to educate suppliers about the new policy. Only companies with no record of major violations of foreign exchange regulations for the past two years are eligible.

 

Read the full report at Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.


Posted: 15 March 2011, last updated 16 September 2011

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